California Department of Water Resources’ CalATERS Travel Reimbursement Program

CALIFORNIA DEPARTMENT OF WATER RESOURCES Review Report CALIFORNIA AUTOMATED TRAVEL EXPENSE REIMBURSEMENT SYSTEM TRAVEL REIMBURSEMENT PROGRAM July 1, 2016, through June 30, 2017 BETTY T. YEE California State Controller March 2020 BETTY T. YEE California State Controller March 2, 2020 Karla Nemeth, Director California Department of Water Resources 1416 9th Street, Room 1115-1 Sacramento, CA 95814 Dear Ms. Nemeth: The State Controller’s Office (SCO) has completed the review of California Department of Water Resources’s (DWR) California Automated Travel Expense Reimbursement System (CalATERS) Travel Reimbursement Program. The review period was July 1, 2016, through June 30, 2017. We reviewed the CalATERS Travel Reimbursement Program to determine whether DWR has effective internal controls to ensure that travel expense claims (TECs) are legal, proper, and in accordance with CalATERS Travel Reimbursement Program guidelines; and to determine whether DWR maintains adequate documentation to support the CalATERS TECs submitted to the SCO. We found that DWR does not have effective internal controls to ensure that TECs are legal, proper, and in accordance with CalATERS Travel Reimbursement Program guidelines; and does not maintain sufficient supporting documentation to support the TECs submitted to the SCO. If you have any questions, please contact Andrew Finlayson, Chief, State Agency Audits Bureau, by telephone at (916) 324-6310. Sincerely, Original signed by JIM L. SPANO, CPA Chief, Division of Audits JLS/as California Automated Travel Expense Reimbursement System California Department of Water Resources Travel Reimbursement Program Contents Review Report Summary ............................................................................................................................ 1 Review Authority ............................................................................................................... 1 Background ........................................................................................................................ 1 Objectives, Scope, and Methodology ............................................................................... 2 Conclusion .......................................................................................................................... 2 Follow-up on Prior Audit and Review Findings ............................................................. 2 Views of Responsible Officials .......................................................................................... 2 Restricted Use .................................................................................................................... 3 Findings and Recommendations ........................................................................................... 4 Attachment—California Department of Water Resources’ Response to Draft Review Report California Automated Travel Expense Reimbursement System California Department of Water Resources Travel Reimbursement Program Review Report Summary The State Controller’s Office (SCO) has completed the review of California Department of Water Resources’ (DWR) California Automated Travel Expense Reimbursement System (CalATERS) Travel Reimbursement Program. The review period was July 1, 2016, through June 30, 2017. Our review found that DWR does not have effective internal controls to ensure that travel expense claims (TECs) are legal, proper, and in accordance with CalATERS Travel Reimbursement Program guidelines. DWR does not maintain adequate documentation to support CalATERS TECs submitted to the SCO, as described in the Findings and Recommendations section of this report. Review We conducted the review pursuant to Government Code (GC) section 12410, which states, “The Controller shall superintend the fiscal Authority concerns of the state. The Controller shall audit all claims against the state, and may audit the disbursement of any state money, for correctness, legality, and for sufficient provision of law for payment.” In addition, GC section 12411 states that “The Controller shall suggest plans for the improvement and management of the public revenues.” CalATERS is the statewide travel reimbursement system used by the State Background of California. The system is administered by the California Department of Human Resources (CalHR), the California Department of General Services (DGS) and the SCO. Rules and regulations are passed from the California Code of Regulations through CalHR, which disseminates them to state agencies to enforce. DGS is responsible for establishing each state agency’s access to CalATERS, in addition to procurement, as DGS dictates how rental cars and hotels are procured. The SCO is responsible for reimbursing employees based on their TECs entered into CalATERS. State employees who travel on official state business are reimbursed for expenses incurred while traveling. In CalATERS, every employee has a unique log-on identity and password. Two levels of review are required for every TEC. The first level is the claimant’s supervising manager or approver as assigned by the agency. Only department-assigned staff can be approvers, and they must be granted access in the CalATERS system to be able to approve TECs. Approvers not only approve the TEC in the system, but also physically sign a hard copy of the CalATERS transmittal page with supporting documentation. This signature confirms that the approver has reviewed the documents contained in the supporting package, and that the package includes all necessary supporting documentation. Once the authorized approver has approved the TEC, it is electronically submitted to each department’s assigned accounting staff; the signed hard copy is also forwarded to the department’s accounting staff. The departmental accounting staff then compares the hard copy support to the -1- California Automated Travel Expense Reimbursement System California Department of Water Resources Travel Reimbursement Program electronic TEC, validates that all necessary supporting documentation has been submitted, and approves the TEC. The departmental accounting staff has the ability to issue TEC payments of acceptable amounts if required supporting documentation is not received; however, staff members cannot add any additional dollar amounts to TECs. Objectives, Scope, The review period was July 1, 2016, through June 30, 2017. Our review assessed DWR’s CalATERS Travel Reimbursement Program to gain and Methodology reasonable assurance that payments are legal, proper, and are supported by sufficient documentation. The review objectives were to determine whether DWR:  Has effective internal controls to ensure that TECs are legal, proper, and in accordance with CalATERS Travel Reimbursement Program guidelines; and  Maintains adequate documentation to support CalATERS TECs submitted to the SCO. To achieve our objectives, we:  Reviewed DWR’s policies and procedures for the CalATERS Travel Reimbursement Program;  Interviewed DWR management and key personnel to gain an understanding of the operations and activities within their respective divisions/units; and  Used statistical random sampling with the attribute methodology to determine the sample size. The sample included 100 TECs totaling $35,883, out of 16,710 TECs totaling $6,552,998. Performed tests to determine whether CalATERS TECs were in compliance with program guidelines. Conclusion Our review found that DWR does not maintain adequate documentation to support CalATERS TECs submitted to the SCO, as described in the Findings and Recommendations section of this report. Follow-up on We have not previously conducted an audit or review of DWR’s Prior Audit and CalATERS Travel Reimbursement Program. Review Findings Views of We issued a draft review report on December 23, 2019. Katherine S. Responsible Kishaba, Deputy Director, Business Operations, responded by letter dated January 17, 2020 (Attachment), agreeing with the recommendations but Officials not the overall assessment that DWR does not have effective internal controls surrounding TEC processing because it uses scanned copies instead of the required original documentaion. This review report includes DWR’s complete response. -2- California Automated Travel Expense Reimbursement System California Department of Water Resources Travel Reimbursement Program Restricted Use This review report is solely for the information and use of DWR and the SCO; it is not intended to be and should not be used by anyone other than these specified parties. This restriction is not intended to limit distribution of this review report, which is a matter of public record, and is available on the SCO website at www.sco.ca.gov. Original signed by JIM L. SPANO, CPA Chief, Division of Audits March 2, 2020 -3- California Automated Travel Expense Reimbursement System California Department of Water Resources Travel Reimbursement Program Findings and Recommendations FINDING 1— DWR lacks adequate controls over the TEC approval process. Employees scan their original, hard copy receipts into PDF documents and email their Lack of adequate PDFs to a central email address with copies to their approving managers. controls over the Managers review the PDFs, comparing them to employees’ CalATERS Travel Expense TECs. After managers approve CalATERS TECs, the travel unit staff Claim approval members also review the PDFs and compare them to the CalATERS process TECs. Neither managers nor the travel unit staff members review the original, hard copy receipts; only the scanned PDF copies are reviewed. During our review of 100 TECs, we found that 81 TECs submitted for reimbursement included no original, hard copy receipts. There was no evidence that employees send original, hard copy receipts to managers for review, or that managers review the original hard copy receipts. The records for the remaining 19 TECs were not retained (see Finding 2). Section 1200 (Travel Expense Claim [TEC]) of the Travel Guide Supplement to the State Administrative Manual (SAM) states, in part, “Employees must furnish original receipts when claiming reimbursement for lodging, transportation, training expenses, professional dues, licenses and fees, and the purchase of airline tickets.” DWR failed to follow established SAM guidelines. We determined that this lack of supporting documentation and proof of review is a systemic issue; therefore, we concluded that additional samples would yield the same results. However, this issue does not correlate to any dollar value findings. Recommendation We recommend that DWR’s travel unit develop policies and procedures to ensure that approving managers review original hard copy receipts. DWR’s Response DWR agrees and will develop and implement a policy and procedure to ensure [that] reviewing managers/approvers review original receipts. DWR will complete this by September 1, 2020. FINDING 2— DWR lacks adequate controls to ensure that scanned PDFs of original, hard copy receipts are transferred from the email system into its document Lack of supporting retention software (Documentum). DWR was unable to provide us with documentation receipts supporting 19 of 100 TECs selected for testing. DWR stated that the travel unit was understaffed and PDFs of original, hard copy receipts had been sent to travel unit staff who separated from the department. As a result, some PDF copies of original, hard copy receipts were not saved properly. Without reviewing these TECs, we cannot assure that the paid TECs were supported by adequate documentation, or that the documentation was reviewed. -4- California Automated Travel Expense Reimbursement System California Department of Water Resources Travel Reimbursement Program Every five years, state agencies must have a document retention policy approved by the California Secretary of State. DWR’s approved document retention policy states that TECs are maintained in the office for two years and then retained in the archive for two additional years (a total of four years) or until audited. The Internal Revenue Service recommends that businesses maintain accounting information that is relevant to their taxes for at least three years. We did not sample additional TECs, as we determined that the lack of supporting documentation is a systematic issue; therefore, we concluded that additional samples would yield similar results. However, this issue does not correlate to any dollar value findings. DWR was able to subsequently provide original, hard copy receipts that it obtained from employees for 11 of the missing 19 selections. DWR also noted that it included these supporting PDF copies of original, hard copy receipts in their Documentum. Although DWR was able to obtain these 11 PDF copies of original, hard copy receipts from employees, DWR still does not maintain sufficient supporting documentation. The DWR travel unit, not individual employees, should maintain the original receipts. Recommendation We recommend that DWR management implement policies and procedures to ensure that all original receipts are reviewed and included in Documentum. DWR’s Response DWR agrees, and will implement a policy and procedure [to ensure that] the original receipts are reviewed and copies are placed in Documentum. DWR will complete this by September 1, 2020. FINDING 3— When testing 81 TECs, we found that departmental accounting staff had approved four TECs for payment with incomplete supporting Travel Expense documentation. Our review found four TECs with erroneous expense Claims approved types, missing Excess Lodging Rate Request forms, and/or incomplete without proper excess lodging documentation. One TEC included a business meal support expense that should have been claimed as a standard meal; two TECs included high-cost lodging rates without the required Excess Lodging Rate Request form and documentation of proper approval from management; and another TEC included a high-cost lodging rate with an incomplete Excess Lodging Rate Request form. Title 2, California Code of Regulations, section 599.623(b) states, in part, “Claims must include the establishment, the persons in attendance, the business conducted, and the reason why the business had to be conducted during the meal period.” -5- California Automated Travel Expense Reimbursement System California Department of Water Resources Travel Reimbursement Program SAM chapter 727 states, in part: In some instances, the cost of business-related meal expenses may be allowed. It must be clearly shown that it was impractical to conduct the State’s business during working hours and that the meal took place in conditions beyond the employee’s control. The employee provides justification on the [TEC]. The statement must include the purpose or goal of each business-related meal and the unusual conditions that justify payment. SAM chapter 715 states that CalHR requires a minimum of 10 days advance notice for exception requests to be submitted and approved on an Excess Lodging Rate Request form prior to the trip. DWR’s failure to follow established policies and procedures has resulted in improper TECs erroneously submitted to the SCO. SCO sampling methods would not yield samples with these specific characteristics. Recommendation We recommend that the DWR travel unit ensure that all employees are adequately trained and have knowledge of applicable SAM and DWR policies and procedures for the CalATERS Travel Reimbursement Program. Doing so will ensure that the controls in place are working effectively, and that accurate TECs are submitted to the SCO. DWR’s Response DWR partially agrees with this recommendation. DWR has provided training in the past and, therefore, will not be providing department-wide training again as the recommendation suggests. DWR will reiterate and/or provide TEC policies/procedures to all staff via email and provide additional information stressing the importance of these policies and procedures. This will be done as part of the rollout of the new policies and procedures previewed above. -6- California Automated Travel Expense Reimbursement System California Department of Water Resources Travel Reimbursement Program Attachment— California Department of Water Resources’ Response to Draft Review Report -1- State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250 http://www.sco.ca.gov S18-TVL-9000